March 14 (Bloomberg) -- Treasuries slid, sending 10-year
yields to a four-month high, while the dollar rose and gold
tumbled as the Federal Reserve’s improved economic assessment
caused investors to reduce bets on more monetary easing. Most
U.S. stocks fell a day after the biggest rally of 2012.

The U.S. 10-year yield increased 14 basis points to 2.27
percent and the dollar strengthened versus all 16 major peers.
The Standard & Poor’s 500 Index retreated 0.1 percent to
1,394.28 at 4 p.m. in New York after yesterday closing at its
highest level since June 2008. The Dow Jones Industrial Average
rose for a sixth day, its longest rally in more than a year,
ending up 16.42 points at a more-than four-year high of
13,194.1. Gold futures slid to an eight-week low.

The Fed said yesterday that strains in global financial
markets have eased and the labor market is gathering strength.
The central bank said separately that 15 of the nation’s largest
19 banks may keep adequate capital levels even in a recession.
European industrial output rose 0.2 percent in January from the
previous month. Chinese Premier Wen Jiabao said relaxing
property curbs could cause “chaos” in the market.

“Some worry that with the Fed’s upgrade of the economic
environment, they may not do a bond purchase program on the long
end,” said Ira Jersey, an interest-rate strategist at Credit
Suisse Group AG in New York, one of 21 primary dealers that are
required to bid at the auctions.

The yield on the 30-year U.S. Treasury climbed 14 basis
points to 3.41 percent, the highest since October. The
government today sold $13 billion auction of 30-year bonds at
yield of 3.383 percent, the highest since August. The Fed’s 21
primary dealers that are required to bid at the sale were
awarded 56.3 percent of the securities, compared with an average
of 52 percent for the past five sales. Two-year yields increased
four basis points to 0.39 percent.

Commodities Slip

The S&P GSCI Index of commodities lost 0.8 percent as
silver and gold led declines among 21 of 24 raw materials.
Copper dropped the most in a week, losing 1.4 percent to $3.848
a pound, on concern demand will ease in China. Gold for April
delivery declined 3 percent to $1,642.90 an ounce. Oil for April
delivery slid 1.2 percent to settle at $105.43 a barrel in New
York after stockpiles at Cushing, Oklahoma, climbed to the
highest level in nine months.

More than two stocks retreated for each that rose on U.S.
exchanges. MetLife Inc. slid 5.8 percent after a plan for a
share buyback was rejected by the Fed. The Dow Jones
Transportation Average lost 1.4 percent as railroads CSX Corp.
and Norfolk Southern Corp. tumbled at least 2.9 percent. Apple
Inc. advanced 3.8 percent to a record $589.58 after Morgan
Stanley raised its share-price estimate to $720.

Highest Since 2007

The Dow Jones Industrial Average surged 218 points
yesterday and closed at the highest level since 2007, while
financial shares in the S&P 500 rallied 3.9 percent as a group,
the biggest gain of the year. The Fed said that it expects
“moderate economic growth” and predicted the unemployment rate
“will decline gradually.”

“Investors globally believe that macro risks have
subsided” because of central bank actions, Tony Crescenzi, a
strategist at Pacific Investment Management Co., said today in a
radio interview on “The Hays Advantage” with Kathleen Hays and
Vonnie Quinn. PIMCO manages the world’s biggest bond fund in
Newport Beach, California. “The data as it’s accumulated has
convinced more and more investors that the U.S. economy is on
firmer footing than many previously thought.”

Stress Tests

JPMorgan Chase & Co. and Wells Fargo joined banks raising
dividends and authorizing share repurchases after passing the
stress tests. The results of the Fed’s tests showed that almost
three years of economic expansion have helped U.S. banks raise
profits, rebuild capital and increase liquidity after the
collapse of Lehman Brothers Holdings Inc. in 2008.

Citigroup Inc., the lender that took the most government
aid during the financial crisis, said it will resubmit its
capital plan to regulators after failing to meet some minimum
standards in the tests. Citigroup has repaid $45 billion in TARP
money. Chief Executive Officer Vikram Pandit said in a memo to
employees today that the bank still plans a “meaningful”
payout to shareholders.

“I was expecting all of the banks to pass, but when you
look at the terms, the stress tests were so onerous that a
modest miss really isn’t all that discouraging,” said William
Fitzpatrick, a Milwaukee-based financial-services analyst at
Manulife Asset Management, whose team oversees $800 million.

European Stocks

The Stoxx 600 advanced for a second day as three shares
gained for every two that declined. Barclays Plc and Credit
Suisse Group AG climbed at least 3.9 percent to lead a rally in
bank stocks. EON AG, Germany’s largest utility, jumped 6 percent
as earnings exceeded analysts’ estimates. Legal & General Group
Plc surged 7.2 percent after the fourth-biggest U.K. insurer by
market value boosted its dividend as full-year profit rose.

The dollar advanced 0.4 percent to $1.3026 against the euro
and strengthened 1 percent versus the yen. The Dollar Index, a
gauge of the currency against six major peers, increased 0.5
percent to the strongest level since January.

The pound strengthened versus 14 of 16 major peers and the
yield on the 10-year gilt jumped 17 basis points to 2.34
percent.

Britain is proposing to revive “perpetual gilts,” first
used in the wake of the 1720 South Sea Bubble crisis, to allow
the government to borrow for as long as possible at record-low
rates, according to two people familiar with budget discussions.
Chancellor of the Exchequer George Osborne will use his March 21
budget to announce a consultation on introducing bonds of up to
100 years and reviving debt with no fixed maturity.

The two-year Italian yield slipped four basis points to
1.997 percent as the government sold 6 billion euros ($7.8
billion) of bonds today, with borrowing costs on its three-year
debt falling to the lowest since October 2010.